Corporate India slams policy procrastination

Corporate honchos, led by Infosys non-executive Chairman K V Kamath and GVK Group Vice-Chairman Sanjay Reddy have called for long-term policies to revive sagging growth and blamed lack of policy clarity, coupled with high interest rate as the key reason for the current economic mess.

Delayed policy measures, slowdown in industrial production, elevated interest rates and liquidity concerns have moderated the growth prospects in the domestic economy, said Kamath.

“High interest rate is a very big challenge we have got. As far as the investment engine is concerned, interest rate is not the only issue there. Land clearances, environmental policies are not clear,” Kamath told a University of Michigan-organised India business conference here.

Kamath added if that doesn’t happen, one has to hold back investments.  “There has to be clarity in all these things or there has to be confidence within the industry that these things will be handled properly (by the government),” he explained.

Infosys founder & chief mentor N R Narayana Murthy and Wipro head Azim Premji had also criticised the Centre for procrastinating on economic policy measures in the recent past. It can be noted that after record growth numbers, the GDP had hit a nine-year low of 6.5 per cent in FY12, which had led to a rash of growth revisions from almost all the international agencies.

What is more worrying is that as growth continued to tread south, there was a second round of GDP downward revisions in the past fortnight by many, including the RBI.

While the central scaled down its GDP forecast to 6.5 per cent, many i-bankers and rating agency Crisil and Moody’s Analytics brought down their forecasts to as low as 5.4-5.5 per cent for this fiscal.  Kamath said fiscal deficit also need to be addressed.He said capital market needed to be vibrant for a stable foreign exchange.Fiscal deficit hit a high of 5.9 per cent of GDP last fiscal from 4.1 per cent in the previous year."We are lagging behind China by seven years in steel and cement production," Kamath said.

GVK Group’s Reddy said, “We see many challenges in the power sector. Uncertainties and reversal of policies hit investment in the power sector. Land acquisition and environment clearances delay are big challenges.”

The frequent changes in policies had hit fuel availability for the power sector, he said adding, “the government should allow import of coal and LNG to avoid fuel crisis”.

“We need political will and long-term measures,” Reddy added. Crisil chief economist Dharmakirti Joshi said, the next growth should be from manufacturing sector as services sector have already shown phenomenal growth. The domestic IT sector succeeded due to non-infrastructure requirement.

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